Markets & Finance

S&P: ADM Still a Buy


From Standard & Poor's Equity ResearchArcher-Daniels-Midland (ADM)

Reiterates 4 STARS (buy)

Analyst: Joseph Agnese

ADM posted September-quarter EPS of 61 cents, vs. 29 cents, 2 cents ahead of our expectations. Increases in bioproduct demand continued to be the main growth driver, although all major segments improved vs. the prior year. We see benefits in fiscal 2007 (ending June) from improved sweetener pricing, the growing U.S. biofuel industry, and strong demand for agricultural services. On recent weakness in ethanol pricing, we see fiscal 2008 EPS of $2.75, with growth decelerating to 10% from our forecast of 25% for fiscal 2007. As a result, our 12-month target price falls $5 to $45, based on our updated P/E analysis. /J.Agnese

Monster Worldwide (MNST)

Reiterates 1 STARS (strong sell)

Analyst: Mark Basham

Former CEO and Chairman A. McKelvey declined to be interviewed by attorneys for the company in its internal stock option investigation, as well as resigning his directorship. McKelvey resigned his previous posts earlier in October. In a letter filed with the SEC, McKelvey's lawyer stated that McKelvey did not express his thoughts and recollections as clearly or accurately as he would have liked when he previously discussed the stock options matter with company officials in July. We think Monster's corporate governance remains in question following this latest development.

Kohl's (KSS)

Downgrades to 3 STARS (hold) from 4 STARS (buy)

Analyst: Jason Asaeda

The downgrade is based on valuation. We see strength in the company's growing stable of exclusive, higher quality brands and products sustaining its positive sales trend over the balance of fiscal 2007 (ending January) and through fiscal 2008. We also look for operating margins to widen on the anticipated benefits of markdown optimization software and projected sales leverage on expenses. But we think these positive factors are well reflected in the share price, which is up roughly 49% year-to-date. We are reiterating our $3.20 fiscal 2007 and $3.85 fiscal 2008 EPS estimates, and are keeping our 12-month target price of $75.

China Petroleum & Chemical (SNP)

Downgrades to 3 STARS (hold) from 5 STARS (strong buy)

Analysts: L. Tan, CFA, L. Cang

Third quarter net profits rose 51%, on improved performances across all segments, except a wider

operating loss than expected in refining. We are raising our 12-month target price to $77 from $71, reflecting a reduced discount to its

peers and positive earnings momentum, and based on 8 times our 2007 earnings estimate. Our downgrade reflects a recent share price rise. Downside risks include a possible delay in a reduction in oil product price controls, as well as a rebound in crude prices shifting investor

interests to upstream producers.


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